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Treatment of Discount in Bids Evaluation

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Re: Treatment of Discount in Bids Evaluation

Post  RJM on Tue Oct 26, 2010 6:57 pm

In addition to Mauka contribution,

In tenders evaluation process three types of discounts may be encountered namely; unconditional, conditional and cross-discount and are subjected to different interpretation in the process.

1. Unconditional discounts: these are discounts offered that reflect last-minute business decisions. It could be because of stiff competition or as result of discounts received from the suppliers in the supply chain and the like. These type of discounts normally no conditions are attached in their applicability in the tender price. Therefore, the original tender prices are modified at the point of the tenders evaluation [The effect of unconditional discounts should be indicated in Table 6 (columns g and h) – See Bid Evaluation Guidelines for Procurement of Works, Goods and Non-consultancy Services issued by PPRA, July 2007, page12].

2. Conditional discounts: these are offered with conditions i.e. I will offer discount of 1% if I will be awarded the contract. The premise for these types of discounts is that the discount given whether applicable on total tender price or on certain group of items etc. but will not be considered for evaluation purpose. However, for ordering purpose or execution of the contract, such discount shall be considered. In other words, bid must emerge as a winner for the discount to be applicable.

3. Cross-discounts: there are offered in the event that more than one contracts or lots/packages will be to the same bidder [i.e. I will offer discount of 2% if awarded all lots or lot 1, 3, 6, 7 out of 9]. Where the bidding document included more than one lot and permitted bidders to offer discounts on the award of one or more lots, then procuring entity should to determine the lowest evaluated combination of bids. In this case the procuring entity should select the optimum combination of the awards on the basis of least overall cost of the total contract package, consistent with the qualification criteria. Because of “awarding based optimum combination” the bidder offering lowest evaluated tender on a particular package/lot may be denied award because of such a restriction [total saving to the procuring entity].

From the above, the contentious issues can answer as follows:-

1. Whether the tag “if the firm will be awarded the two lots it will offer discount of 5%” is acceptable.

This is a common practice in tendering process, and then it is acceptable.

2. Whether Tender Board can apply the said discount for the lot which the firm has been recommended.

Mauka wrote, “because the offer is subject to a condition, and the firm will not accept counter offer without fulfilling the original requirement”.

I tend to agree with Mauka and this is cemented by the Law of Contract Act of Tanzania, Cap 345 Section 7 (b) [Acceptance must be absolute] which states that “In order to convert a proposal into a promise, the acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted; and if the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the prosper may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but if he fails to do so he accepts the acceptance”.

From the above there are two scenarios; [1] if the proposer [bidder] insists that his proposal shall be accepted in the prescribed manner then the discount of 5% cannot be applied in one lot; [2] if the proposer [bidder] fails to do so he accepts the acceptance. I doubt whether scenario 2 can be applied by the Tender Board or not because it will be like testing whether the bidder is aware that he is required to insist his proposal to be accepted as offered.

My position is that the 5% will be applicable if the bidder wins both lots. As presented if the bidder was lowest to one lot then should be awarded respective lot without applying the rebate/discount.

RJM

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Re: Treatment of Discount in Bids Evaluation

Post  mauka on Fri Jul 16, 2010 9:34 pm

RJM
I got your scenario and i will try to respond according to the TB concerns
The first one, the possibility of the firm to provide discount of 5% to the PE is legal and there is no need for Tender Board to worry about that. The law of contact as edited in 2002 provide the meaning of offer as the final expression of the willingness by the offeror to be bound by his offer, therefore, it’s the other party to decide whether to accept the offer or not”.

In above scenario, the firm has clearly expressed his willingness to enter into contract with PE in terms of his offer by providing that “if the firm will be awarded the two lots it will offer discount of 5% “ With such finality, the only thing to be waited for, is the assent of other party that is TB to accept or to reject the discount. In this situation and before to make any decision on whether to accept or to reject the offer, TB is required to examine the essences of discount, the overall costs and awarding criteria in relation to our Procurement Laws

Despite of good intention of the supplier to “set up” the PE in order to secure both lots, But the supplier was successful in one lot and unsuccessful in another lot and our Procurement laws (PPA, 2004 and its Regulations) is very clear about who should be the successful bidder, therefore, TB was required to award contracts to the respective winners for the all lots.

for the second concern, if the TB wants to apply and accept the discount, acceptance should be of the whole of the offer with its associate terms that`s two lots for 5% of discount. In this case, The TB cannot accept a part of its terms which are favorable to them and reject the rest. That is unacceptable, because the offer is subject to a condition, and the firm will not accept counter offer without fulfilling the original requirement.


mauka

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Treatment of Discount in Bids Evaluation

Post  RJM on Mon Jul 12, 2010 8:45 pm

One PE advertised tender which had five lots. During opening of tenders it was revealed that one firm tendered for two lots with a tag that “if the firm will be awarded the two lots it will offer discount of 5% “. In fact this was properly recorded in the minutes of tenders opening.

During evaluation, the said firm was the lowest evaluated bidder in one lot and recommended for award for the lot after post-qualification. The firm was not successful in the other lot. The PMU reviewed the evaluation report and submit the same to the Tender Board for adjudication. During deliberation Tender Boaard had the following concerning:

[1] Whether the tag “if the firm will be awarded the two lots it will offer discount of 5%” is acceptable.
[2] Whether Tender Board can apply the said discount for the lot which the firm has been recommended.

GEVE, Mauka, GadielCM and others, what is your take on this?

RJM

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